The Energy Frontier: Expander’s quest to turn carbon into cash

Beyond the blue-chip energy stalwarts, an impressive breed of North America’s unsung entrepreneurs is trying out on the frontiers of the industry trying to break new ground or set the stage for others to propel the industry forward. The Energy Frontier series highlights the people and plays at the outer edges of the continent’s energy industry.

Imagine being able to convert greenhouse gases generated by oil sands processing from an environmental liability into a source of big profit.

CALGARY – Henry Gil is planning to do for Alberta’s industrial heartland with natural gas what several oil giants couldn’t make work with bitumen.

The president of closely held upstart Solaris Synthetic Petroleum Inc., or Solaris GTL, aims to capitalize on the voracious appetite among oil sands companies for diluent, a gasoline-like liquid used to thin sludgy bitumen so it can flow in pipelines. What’s more, he wants to harness a decades-old trick of chemistry to make it from natural gas. Continue reading.

That’s what a tiny Calgary company, Expander Energy Inc., says it can do, and it will be on its way to the big times if its technology, which converts refinery waste into synthetic diesel, is incorporated into the $16-billion refinery proposed for the West Coast of British Columbia by newspaper magnate David Black, as well as in other upgrading schemes.

The modest, six-staff operation of engineers and businessmen is one of many entrepreneurial companies in Calgary’s oil community looking for breakthroughs to clean up Canada’s massive oil sands rather than cede the field to energy alternatives.

With greenhouse gas emissions the big hurdle to overcome, Expander has adapted a technology originally developed in 1925 by German chemists Franz Fischer and Hans Tropsch to convert coal into oil so it can be applied to Alberta’s bitumen.

In its public debut this week at the Oil Sands Heavy oil Technologies conference, Steve Kresnyak, chief technology officer at Expander, said the innovation comes close to delivering a silver bullet for Canada’s resource.

The technology, known as FTCrude, reduces carbon dioxide emissions and increases output by taking carbon-rich refinery waste, gasifying it and incorporating natural gas to create synthetic diesel, naphtha and other oil products. The company obtained a Canadian patent for partial and full heavy oil and bitumen upgrading and is seeking more.

Related

“The real advantage of Expander is that you maximize all the carbon that is available in the system,” CEO Jim Ross said in an interview.

“The bottom line is a minimum 50% reduction in CO2, and we think we can see a reduction of as much as 80%.”

Expander is in contract negotiations with Mr. Black’s company, Kitimat Clean Ltd., for a licensing agreement to incorporate its process into his proposed 400,000 to 500,000 barrels-a-day refinery near Kitimat, on British Columbia’s northern coast.

While costly — it adds $3-billion to the cost of the refinery, raising the price tag to $16-billion — Mr. Black has already said publicly he likes it because it would reduce greenhouse gas emissions by at least half relative to conventional methods.

It would be the biggest deal yet for the decade-old Expander — but not the only one it’s working on. The closely held company, which has been funded by its shareholders so far, has also pitched the technology to oil sands producers looking to improve their carbon footprint while partially upgrading their bitumen.

The real advantage of Expander is that you maximize all the carbon that is available in the system

The United States Environmental Protection Agency says Fischer-Tropsch fuels are in low use today, but that could change because of their environmental benefits.

In addition to refinery waste, the chemical process can convert coal and natural gas into a clean-burning fuel that is colourless, odourless, and low in toxicity, the EPA says on its alternative fuels website. The fuel can be blended with little to no modification with conventional fuels.

“Based on available research, there are no significant differences in Fischer-Tropsch fuels’ performance versus petrodiesel fuels,” the EPA says. “In addition, while many alternative fuels require completely separate distribution systems, Fischer-Tropsch fuels can use the existing fuel distribution infrastructure. This means the fuels can be transported in the same ships and pipelines as crude oil.”

In the past, the process was used when cheap oil was not available — Germany produced oil from coal during the Second World War; South Africa introduced the technology during the apartheid era and today Fischer-Tropsch fuels derived from coal continue to be extensively used in buses, trucks and taxis.

If used in the Kitimat Clean refinery, it would increase output significantly.

Assuming the refinery processes 400,000 barrels a day of bitumen, the technology would increase overall output by another 60,000 bpd by capturing 100,000 bpd of residue that would otherwise be wasted and blending them with one billion cubic feet a day of natural gas.

Mr. Ross said the process doesn’t need to be piloted because the technology puts together parts that are already commercially viable.

A gasifier is already being used by Nexen Inc.’s Long Lake project and one is being incorporated into the North West Upgrader under construction near Edmonton, although both are using gasification for different products.

While close to making the leap to commercialization, Expander has had its share of ups and downs.

The company was originally set up to look for ways to turn wood chips into biomass, which turned out to be uneconomic. Its re-orientation to heavy oil started with the bankruptcy of its German partner, which left it with basic engineering designs to gasify carbon using the Fischer Tropsch process.

The company suffered a huge setback when its founder and previous CEO, Ron Johnston, died tragically in August, 2010, when the Cessna 414 Alpha he was piloting disappeared off the coast of Nova Scotia near Sydney.

Mr. Ross, who had been the company’s finance vice-president, stepped up to the CEO role. Mr. Ross has had a long career in the investment industry, including as senior managing director of Jennings Capital, a Calgary-based national investment dealer.

When Victoria-based David Black announced his plans to build the Kitimat refinery last summer, Expander pursued him.

“We are at the contract negotiation phase,” Mr. Ross said. “He is in the process of doing due diligence now, but we have not signed any official agreement. We are under nondisclosure and proprietary information — so we have started sharing information. He has engaged an engineering consulting firm … to review our process and the integration.”

Expander is also in discussions with several oil sands companies to build a partial upgrader to process their waste.

Mr. Ross said it’s hard for companies that have invested a lot of money in other processes to switch to something new, adding to their costs.

But like so many relentless innovators, Expander is convinced it has the GHG answer for the future, wrapped up in returns that are so attractive they will be hard to pass up.